A.M. Best has removed from under review with positive implications and upgraded the financial strength rating (FSR) to A (Excellent) from A- (Excellent) and the issuer credit rating (ICR) to “a” from “a-” of Atlantic Casualty Insurance Co. (Goldsboro, NC). The outlook assigned to each rating is stable.
The ratings upgrade reflects Atlantic Casualty’s excellent risk-adjusted capitalization, improved operating performance, strong cycle management practices and solid profitability of its core book of business, as well as the explicit and implicit support from its new parent, Auto-Owners Insurance Company (Auto-Owners). Partially offsetting these positive rating factors is the company’s fluctuating underwriting performance, continued soft (but firming) market conditions, a historically elevated underwriting expense ratio and the susceptibility to weather-related losses.
The positive rating factors are derived from management’s efforts to improve performance by focusing on the company’s historically profitable core general liability book of business, exiting unprofitable books of business and troublesome states and improving efficiencies through investments in technology. The ratings also recognize the support derived from its new parent company, Auto-Owners. This support includes reinsurance protection, a proven and tested enterprise risk management structure, back-office underwriting support and lead generation within Auto-Owner’s 6,000-strong agency plant. While integration risk is present in any transaction, Auto-Owners’ support, along with Atlantic Casualty’s non-admitted insurance expertise, should help mitigate this risk.
As an excess and surplus writer, Atlantic Casualty’s premium volume will inherently fluctuate through various underwriting cycles. While underwriting and operating results have shown improvement over the last several years, variability of the results also has been evident. The company continues to remain exposed to catastrophic weather-related losses despite property exposure that is moderate for its underwriting footprint.
Factors that could result in upward movement of the assigned ratings include a sustained improvement in operating earnings and the resulting return measures over time. However, factors that could result in downward rating pressure over the near term include: a change in Atlantic Casualty’s relationship to its parent or its support that affects the company’s operational stance; weakened operating earnings due to a severe reduction in the profitability of its core book of business; a material loss in capitalization; and substantial catastrophe losses that are outsized relative to the company’s peers and industry averages.
Source: A.M Best
Topics Auto Underwriting AM Best Casualty
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